Few sports cars have captured the nation's imagination like the sleek Ford Mustang, a 21st-century reincarnation of an American classic. The Toyota Sienna minivan, by contrast, speaks to the utilitarian aesthetics of Japan: refined interiors, arm rests and lots and lots of cup holders.
Yet, by a crucial measure, the Sienna is far more American than the Mustang. Statistics from the National Highway Traffic Safety Administration that were publicized in "Auto Industry Update: 2006," a presentation by Farmington Hills, Mich., research company CSM Worldwide, show only 65% of the content of a Ford Mustang comes from the U.S. or Canada. Ford Motor Co. buys the rest of the Mustang's parts abroad. By contrast, the Sienna, sold by Japan's Toyota Motor Corp., is assembled in Indiana with 90% local components.
There's more than a little irony in this, considering Ford has launched a campaign to regain its footing with an appeal to patriotism (catchphrase: "Red, White & Bold"). "Americans really do want to buy American brands," asserted Ford Executive Vice President Mark Fields in a recent speech. "We will compete vigorously to be America's car company."
As the Mustang shows, though, it's no longer easy to define what is American. For 20 years now, the dynamic car makers of Asia — led by Toyota, Nissan Motor Co. and Honda Motor Co. — have been pouring money into North America, investing in plants, suppliers and dealerships as well as design, testing and research centers. Their factories used to be derided as "transplants," foreign-owned plants just knocking together imported parts. Today, the Asian car makers are a fully functioning industry, big and powerful enough to challenge Detroit's claim to the heart of U.S. car manufacturing.
The result is a brewing public-relations war, with both sides wrapping themselves in the Stars and Stripes. Toyota, for example has been running commercials touting its contribution to the areas of the U.S. economy where it has built factories.
Next year, the staid Toyota Camry will undergo the ultimate rite of passage by entering the most prestigious circuits of the National Association of Stock Car Racing. Toyota President Katsuaki Watanabe said his company's vast network of dealerships saw the Nascar link as a crucial marketing tactic to raise Toyota's profile in the U.S. heartland. "Our dealers told us it was really important to do this," he says.
On Thursday, the Level Field Institute, a grass-roots organization founded by U.S. Big Three retirees, is scheduled to hold a news conference in Washington. Among the points the group is expected to make is its belief that comparing relative North American component content is an ineffective way to determine who is "more American" among auto makers. A better way, says Jim Doyle who heads Level Field, is to look at the number of jobs — from research and development to manufacturing to retailing — each auto maker creates per car sold in the U.S.
Mr. Doyle says the institute's study shows that Toyota in 2005 employed roughly three times more U.S. workers, on a basis of per car sold in the U.S., than Hyundai Motor Co. Each of the Big Three manufacturers in the same year employed roughly three times as many U.S. workers, on a per-car-sold basis, as Toyota. "What's better for the American economy?" Mr. Doyle asks. A GM car "built in Mexico with 147,000 jobs back here in America or a Honda built in Alabama with 4,000 or 5,000 jobs in America?"
Measuring local content is extremely difficult because a part made in America can be assembled from smaller parts, some of which might come from abroad. All of which underscores how the line between what is and isn't American, at least in the auto industry, is "going to be increasingly difficult to pinpoint" as car makers become increasingly international and produce more in local markets, says Michael Robinet, a vice president at CSM Worldwide.
General Motors Corp. is importing Korean-made cars to sell under the Chevy nameplate. Japanese car makers are using American designers for cars being sold in China. Some of the high end luxury BMW "imports" on the road are made in South Carolina. "We don't look at it as an American industry," says Mr. Robinet. "It really is a global industry."
That said, the Japanese manufacturing presence in the U.S. is growing. Foreign-based auto makers in the U.S., led by the Japanese, account for 1.7% of U.S. manufacturing jobs, according to a report by the Center for Automotive Research, Ann Arbor, Mich. After $28 billion in cumulative North America investment — and annual purchases of parts reaching $45 billion or more in recent years — 67% of the Japanese-brand cars now sold in North America are made in North America, according to the Japan Automobile Manufacturers Association.
Japanese investment in U.S. production was a response to the trade tensions of the 1990s, when tensions flared over Japan's surplus with the U.S., of which autos and auto parts were a large portion. By spreading investment across the U.S., Japan's car makers have won crucial allies among U.S. politicians. Last year, when President Bush took to the road to tout his Social Security plan, one of his first stops was a major Nissan plant in Canton, Miss., a conservative corner of the country where the phrase "buy American" no longer means what it once did.
"As the son of a union member, I'll admit that free trade is an issue with which I've struggled," says Republican Sen. Trent Lott of Mississippi, who has a Nissan Titan pickup truck in his garage. But he adds: "Remember that every Nissan built in Canton also was engineered by Americans, for Americans."
What isn't clear is how Mustang fans like Fred Barkley, president of the Bluegrass Mustang Club of Lexington, Ky., would react to the news that the Mustang is only 65% American, at least by one government measure. Mr. Barkley, owner of three Mustangs, one from 1965 and two from the early 1990s, says it "doesn't bother me too much." Told the Toyota Sienna has higher North American content than the Mustang, he is unimpressed. "I wouldn't buy a Sienna," he says. "I don't like them because they are foreign."
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TOKYO — Japan's Toyota Motor Corp., which is threatening to surpass General Motors Corp. as the world's largest car producer, plans to pull further ahead of its U.S. rival when measured by the amount of money it is pouring into new plants and equipment.
Japan's largest auto maker by volume, reporting a 39% rise in fiscal fourth-quarter net income Wednesday, said its current fiscal-year capital expenditure — investment in product development, plants and equipment — would reach 1.55 trillion yen, or roughly $14 billion. That would be a record and a slight increase from the 1.53 trillion yen spent the previous year, which Toyota had earlier said would be the peak.
The number was bigger than the $12 billion or so that the industry was expecting. President Katsuaki Watanabe described it as a response to "unexpectedly strong demand" for the company's cars. He noted that one of the toughest management challenges facing the company was to maintain its vaunted quality even as it ramps up production in Asia, Europe and North America.
Toyota, which produces such models as the Camry sedan, the Sienna minivan and the Lexus line of luxury cars, said its consolidated net profit for the three months ended March 31 was 404 billion yen. That compares with 291 billion yen recorded during the same period a year earlier. Revenue grew to 5.75 trillion yen, up from 4.88 trillion yen a year earlier.
For Toyota's full fiscal year, net profit increased 17% to 1.37 trillion yen. Operating profit for the fiscal year rose 12% to 1.87 trillion on a full-year revenue increase of 13% to 21.03 trillion yen.
Its spending plans illustrate the different fortunes of Asian-based auto makers and their Detroit rivals, even as they compete in similar markets. Toyota lacks the costs of pension and medical benefits borne by GM and Ford Motor Co. for union employees and retirees, a legacy of their previous labor agreements. In Japan, Toyota spends $97 per vehicle on employee health care, while the government covers retirees. That compared with $462 per vehicle for employees and $1,038 per vehicle for retirees for GM, according to consulting firm A.T. Kearney.
Toyota also has offered designs that have won over consumers, carry a perception of higher quality and are more fuel-efficient than many rivals' vehicles, giving the company some insulation against rising gasoline prices. The auto maker has begun making inroads in the profitable light-truck segments with models such as its Tundra and Tacoma pickups. Overall, its share of the key U.S. market has risen to about 14% so far this year from about 10% in 2000, while GM's share has fallen to about 24% from about 28% during the same period, according to Autodata Corp.
The continued high level of investment at Toyota is one of the most telling measures of the difference in resources that Toyota and GM bring to their global rivalry. Toyota is flush with cash and is expanding sales and production in countries all around the globe. GM, by contrast, while growing in some overseas markets like China, is suffering at home. The company restated its earnings after regulators allowed it to revise the way it accounted for a health-care deal with the United Auto Workers union, and now shows a profit for the first quarter of 2006. But GM has been unprofitable in its core automotive operations, closing plants, laying off workers and selling assets.
The $14 billion that Toyota plans to invest during its fiscal year through March 2007 compares with $8.7 billion that GM plans to spend during its current fiscal year through December. "We maintain a commitment to product development," GM said in its most recent annual report, "but our substantial legacy costs give us less available cash to invest relative to some of our competitors."
The difference in investment carries implications for the rivalry between the two car makers over who will hold the mantle of the world's largest car producer by volume. Toyota is increasing sales by roughly 500,000 a year and expects to sell 8.45 million vehicles during its current fiscal year. GM sold 9.2 million vehicles during 2005, up 200,000 from the previous year.
GM has said its world-wide sales rose 4.4% in the first quarter to 2.2 million vehicles, driven by a 16% increase in sales outside of North America. GM hasn't released a forecast for its current fiscal year. But despite its strong performance in China, few analysts think GM can grow enough to compensate for the share it is losing to Toyota and other Japanese rivals in its all-important home market, as well as match Toyota's growth abroad. Most analysts expect Toyota to surpass GM sometime during the next year or two as the world's largest car producer by volume.
Toyota's market capitalization, at about $200 billion, is already greater than those of GM and Ford combined. Toyota said Wednesday that it would ask its shareholders later this year for approval to buy back roughly 200 billion shares. The company also said it would boost its dividend for this fiscal year to 90 yen a share, up from 65 yen.
Toyota, releasing detailed full-year consolidated earnings forecasts for the first time, said that sales for its current fiscal year would rise 6%, to 22.3 trillion yen. But the company forecast a 4.5% decline in net profit to 1.31 trillion yen, because it expects a stronger yen during the year. A strong yen erodes the contribution of overseas sales to earnings, because profits earned in foreign currencies are worth less when converted into yen.
Toyota's consolidated global vehicle sales for the fiscal year ended March grew 7.6% to a record 7.97 million cars. Sales were little changed in Japan at 2.36 million, but rose 13% in North America to 2.56 million vehicles. Toyota's sales in Europe rose 4.5% to 1.02 million vehicles. Sales in Asia outside Japan rose 5.7% to 880,000 vehicles.
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